Source: United States Department of Justice Criminal Division
Hemisphere GNSS (USA) Inc., a satellite global positioning system manufacturer in Arizona that was purchased by CNH Industrial in 2023, has agreed to pay $2.6 million to settle allegations that it violated the False Claims Act by knowingly providing false information to apply for and receive forgiveness of a Paycheck Protection Program (PPP) loan to which the company was not entitled.
Congress created the PPP in March 2020, as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, to provide emergency financial support to millions of Americans suffering the economic effects caused by the pandemic. The CARES Act authorized billions of dollars in forgivable loans to small businesses struggling to pay employees and other expenses. In 2021, Congress offered a second round of forgivable PPP loans through the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act. When applying for PPP loans, borrowers were required to certify the truthfulness and accuracy of all information provided in their loan applications.
In February 2021, Hemisphere applied for a second round PPP loan and certified that it was eligible to receive the loan. Among other certifications, Hemisphere represented that no “entity created in or organized under the laws of the People’s Republic of China” owned or held 20% or more of an economic interest in Hemisphere. The company also certified that it did not retain as a board member a person who is a resident of the People’s Republic of China. At the time of its application, however, both of these certifications were allegedly false. For this reason, Hemisphere was not eligible for the second round PPP loan it received. After receiving this PPP loan, Hemisphere sought and received forgiveness of the total loan amount.
“PPP loans were an important but finite resource available to help eligible small businesses retain employees and keep their doors open,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “When ineligible entities improperly sought PPP loans or forgiveness of those loans, they reduced the availability of this critical support for eligible businesses.”
“Legitimate PPP loans saved small businesses across America,” said U.S. Attorney Gary M. Restaino for the District of Arizona. “But not everyone used the program as intended. Our office will continue to hold accountable those business and individuals who misused the PPP program, as the settlement announced today reflects.”
“The settlement in this matter demonstrates the excellent results achieved through the combined efforts of SBA and the Department of Justice to uncover and forcefully respond to PPP misconduct,” said General Counsel Therese Meers of the Small Business Administration (SBA). “The federal government is strongly committed to identifying and aggressively pursuing any instances of fraud or misconduct within the Paycheck Protection Program.”
The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by GNGH2 Inc. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States ex rel. GNGH2, Inc. v. Hemisphere GNSS (USA) Incorporated, 2:22-cv-00224 (D. Arizona). GNGH2 will receive $260,000 as its share of the settlement.
The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the District of Arizona, with assistance from SBA’s Office of General Counsel and Office of the Inspector General.
Trial Attorney John F. Schifalacqua of the Justice Department’s Civil Division and Assistant U.S. Attorney Anne E. Nelson for the District of Arizona handled the matter.
On May 17, 2021, the Attorney General established the COVID-19 Fraud Enforcement Task Force to marshal the resources of the Justice Department in partnership with agencies across government to enhance efforts to combat and prevent pandemic-related fraud. The task force bolsters efforts to investigate and prosecute the most culpable domestic and international actors committing civil and criminal fraud and assists agencies tasked with administering relief programs to prevent fraud by, among other methods, augmenting and incorporating existing coordination mechanisms, identifying resources and techniques to uncover fraudulent actors and their schemes, and sharing and harnessing information and insights gained from prior enforcement efforts. For more information on the department’s response to the pandemic, please visit www.justice.gov/coronavirus.
Tips and complaints from all sources about potential fraud affecting COVID-19 government relief programs can be reported by visiting the webpage of the Civil Division’s Fraud Section, which can be found here. Anyone with information about allegations of attempted fraud involving COVID-19 can also report it by calling the Justice Department’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The claims resolved by the settlement are allegations only. There has been no determination of liability.